EMI and Payment Institution Licences in the UK

The short answer: what an EMI licence UK firms need involves

An EMI licence UK firms obtain from the FCA is, formally, authorisation or registration as an electronic money institution under the Electronic Money Regulations 2011 (EMRs). It lets a firm issue e-money, such as balances on prepaid cards and digital wallets, and provide related payment services. Firms that only provide payment services, without issuing e-money, apply instead as payment institutions under the Payment Services Regulations 2017 (PSRs).

Each regime has an authorised tier and a smaller, registered tier. An authorised EMI must hold initial capital of at least €350,000, while small EMIs face lighter requirements but are capped in size and cannot provide every service. All of them must safeguard customer funds, and from 7 May 2026 stricter FCA safeguarding rules apply, including daily reconciliations, annual safeguarding audits and a new monthly return.

As of October 2026, the wider framework is also under review. HM Treasury is consulting on modernising payments regulation, which could move much of the detail from legislation into FCA rules.

Which licence do you need?

The first question is what the business actually does. Issuing e-money means accepting funds and issuing a stored monetary value, redeemable at par, that the customer can use to make payments to third parties. Payment services include operating payment accounts, executing payment transactions, money remittance, card issuing and acquiring, payment initiation and account information services. A business that issues e-money and provides payment services needs EMI status; a business that only provides payment services needs payment institution status.

The FCA's application guidance for e-money and payment institutions walks through the choice. The main options are compared below.

Small EMIs and small payment institutions cannot provide account information or payment initiation services, and their registration does not give the passporting-style access some older business plans assumed. The small tiers suit early-stage and niche businesses, but growing beyond the limits requires a full application, which should be planned well before the threshold is reached.

Capital and own funds requirements

Initial capital is the amount a firm must hold when it is authorised; own funds is the ongoing requirement. Under the EMRs, an authorised EMI must maintain own funds at least equal to the higher of €350,000 and the amount calculated under the regulations. For e-money issuance, that calculation is 2% of average outstanding e-money. Where the EMI also provides payment services unrelated to e-money, an additional own funds calculation applies to that activity using one of the methods in the regulations.

Authorised payment institutions calculate own funds under one of three methods set out in the PSRs, as directed by the FCA, based on fixed overheads, payment volume or a relevant indicator. The FCA can adjust the requirement by a limited percentage up or down depending on the firm's risk.

Capital is not just a number on the application. The FCA expects firms to show financial projections, stress testing, a liquidity plan and a credible wind-down plan explaining how customer funds would be returned if the business failed. Thin capitalisation is one of the most common weaknesses in payments applications.

Safeguarding: the core obligation

E-money is not a deposit, and e-money balances are generally not protected by the Financial Services Compensation Scheme. Safeguarding is therefore the main protection customers have if an EMI fails. The EMRs and PSRs require firms to protect relevant funds in one of two ways:

• Segregation. Keeping relevant funds separate from the firm's own funds and, if they are still held at the end of the business day following receipt, placing them in a designated safeguarding account with an authorised credit institution or the Bank of England, or investing them in approved secure, liquid assets.
• Insurance or guarantee. Covering relevant funds with an insurance policy or comparable guarantee from an authorised insurer or credit institution, payable into a designated account if the firm becomes insolvent.

Failures in safeguarding have featured heavily in payments firm insolvencies, where customers waited long periods to recover money and sometimes suffered shortfalls. That experience drove the FCA's reforms.

The new safeguarding regime from 7 May 2026

The FCA's Policy Statement PS25/12 introduced a "supplementary regime" of rules for payments and e-money firms, set out in a new chapter of the FCA's client assets sourcebook (CASS 15). The rules came into force on 7 May 2026 after a nine-month implementation period. They require:

• Daily reconciliations. Internal and external safeguarding reconciliations on each reconciliation day, with weekends, bank holidays and days when relevant foreign markets are closed excluded.
• A resolution pack. Documents and records that would help an insolvency practitioner return funds quickly.
• Annual safeguarding audits. A reasonable assurance audit by a qualified auditor, with an exemption for firms that have not safeguarded more than £100,000 at any time in the previous 53 weeks.
• A monthly safeguarding return to the FCA.
• Due diligence on banks, custodians and insurers holding relevant funds, including consideration of diversification.
• Insurance and guarantee conditions, including a contingency plan at least three months before a policy or guarantee expires.

The FCA did not proceed, for now, with its more ambitious "post-repeal" proposals, including a statutory trust over relevant funds and a requirement to receive funds directly into designated safeguarding accounts. These may return as part of wider payments reform.

The application process and timeline

Applications are made through the FCA's Connect system. The FCA says it usually assesses complete payments and e-money applications within three months, and it has set a voluntary target of ten months for incomplete applications. For the general FSMA process and how the FCA approaches applications, see our guide to the FCA authorisation process.

1. Define the services. Map each product to e-money issuance and the specific payment services involved, and decide between authorised and small status.
2. Build the governance. Appoint directors and persons responsible for management of payment services and e-money, a compliance function and an MLRO, and prepare fitness and propriety evidence.
3. Design safeguarding. Choose segregation or insurance, open designated accounts, document the reconciliation method and prepare a resolution pack that meets CASS 15.
4. Prepare the business plan and financials. Include three-year projections, capital and own funds calculations, stress tests and a wind-down plan.
5. Prepare policies. Cover AML and sanctions, fraud prevention, operational and security risk, outsourcing, complaints, the Consumer Duty and use of agents or distributors.
6. Submit and respond. File on Connect, pay the fee, answer the FCA's questions promptly and be ready for interviews.

The FCA's approach document, Payment Services and Electronic Money: Our Approach, sets out its detailed expectations and was updated alongside the safeguarding reforms. Firms in scope should also consider how the Consumer Duty applies, as explained in our FCA Consumer Duty guide.

After authorisation: ongoing obligations

Obtaining an EMI licence UK regulators grant is the start, not the end, of the compliance effort. Authorised and registered firms must submit regular regulatory returns, including the new monthly safeguarding return, notify the FCA of significant changes such as new controllers, new agents or material outsourcing, and maintain own funds at or above the required level at all times.

The FCA supervises payments and e-money firms through portfolio letters, data analysis and targeted reviews, and has repeatedly identified safeguarding, financial crime controls and wind-down planning as priorities. A firm that cannot evidence its arrangements risks requirements being imposed on its authorisation, restrictions on taking new customers or, in serious cases, cancellation.

Change in control is a frequent trap for growing firms. Investors acquiring a qualifying holding generally need FCA approval before completing, so funding rounds need regulatory planning as well as commercial negotiation. Keeping the governance, policies and resources described in the original EMI licence UK application up to date as the business scales is the best protection against supervisory intervention.

Illustrative scenario: small EMI to authorised EMI

This scenario is illustrative only and does not describe any real firm.

A start-up issues prepaid cards for gig-economy workers and registers as a small EMI. Two years later its average outstanding e-money is approaching the €5 million limit and it wants to add payment initiation to its app, which small EMIs cannot provide. It needs a full EMI licence UK application.

Its preparation reveals three issues. First, it must raise capital to meet the €350,000 initial capital requirement and model own funds at 2% of a growing e-money float. Second, its safeguarding reconciliations are performed weekly in spreadsheets; under CASS 15 they must be daily, and its resolution pack does not exist. Third, its board has no independent director and its compliance officer also runs operations.

The firm raises funding, implements automated daily reconciliations, builds a resolution pack and appoints an independent non-executive and a dedicated compliance lead before applying. Because the application describes systems already working, rather than plans, it is far more likely to be considered complete, and the firm can show the FCA a track record from its small EMI period.

Risks and common mistakes

Payments reform and cross-border issues

HM Treasury's July 2026 consultation on modernising payment services regulation proposes moving many detailed requirements from the PSRs and EMRs into FCA rules, while keeping the perimeter, key definitions and core consumer protections in legislation. It also proposes bringing certain stablecoins and tokenised payments within the payments framework, which connects to the new UK cryptoasset regime. Separately, the FCA's 2026 Consumer Duty consultation proposes excluding the safeguarding of funds for payment and e-money activity from the Duty's scope. These are proposals, not yet law.

For international groups, UK authorisation does not grant access to the EU, and EU authorisation does not grant UK access. Groups serving customers in the UK, the EU, the Gulf or Bangladesh, including remittance corridors, usually need separate licences or partners in each market, with careful structuring of safeguarding and settlement flows across jurisdictions.

Overseas groups considering a UK EMI should also expect the FCA to look closely at where decisions are made. The FCA expects the UK entity to have its head office and real management in the UK, with directors who understand UK rules and can be supervised effectively. A UK subsidiary that is run in practice from abroad, or that depends entirely on group systems it cannot control, is likely to face difficult questions. Intra-group outsourcing agreements, data access rights and safeguarding account arrangements should all be documented before the application is submitted.

What to do next

• Map your products to e-money and payment services, and choose authorised or small status.
• Model initial capital and own funds, including growth and stress scenarios.
• Build CASS 15-compliant safeguarding, reconciliations and a resolution pack.
• Appoint credible directors, compliance and MLRO before applying.
• Prepare a specific business plan, wind-down plan and Consumer Duty framework.
• Track the payments modernisation consultation and any resulting FCA rules.

TRW & Co's London office is authorised and regulated by the Solicitors Regulation Authority. Our payments and e-money team advises on EMI licence UK applications, safeguarding, agent and distributor arrangements and FCA supervision, working with our fintech and FCA authorisation teams. To discuss your plans, contact us at info@trw.co.

Frequently asked questions

Sources and official materials

1. The Electronic Money Regulations 2011 — Authorisation, capital and safeguarding for EMIs
2. The Payment Services Regulations 2017 — Authorisation, capital and conduct rules for payment institutions
3. FCA: Apply to become an e-money or payment institution — Choosing the right status and preparing an application
4. PS25/12: Changes to the safeguarding regime — Final CASS 15 safeguarding rules in force from 7 May 2026
5. Payment Services and Electronic Money: Our Approach — The FCA's approach document for payments and e-money firms
6. HM Treasury: Modernising payment services regulation — July 2026 consultation on reforming the PSRs and EMRs

General information only, current as at 21 October 2026. It is not legal advice and does not create a solicitor–client relationship. It reflects the law of England and Wales unless stated otherwise; Scotland and Northern Ireland have separate legal systems, and the law changes frequently. Check current official sources and take advice on the facts of your matter.